Opening Range Breakout (ORB) - Intraday Trading System

Discussion in 'Day Trading' started by Cubt, Sep 23, 2013.

  1. Cubt

    Cubt Well-Known Member

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    Guys, as many of us would have already been aware of this strategy. As this is already discussed by Agubhai. Who was trading this strategy & making money consistently. However, as per Agubhai when we increase our position size after spectacular returns we could face consistent draw downs which would result in more no of consistent loss.

    After searching about this strategy, I thought a little bit of tweak would enhance the results. I have google'd & found the below tweaks would be great. Please do check out and provide your inputs.

    Below content is an extract from a website

    Opening Range Breakout (ORB) is a commonly used trading system by professional and amateur traders alike and has the potential to deliver high accuracy if done with optimal usage of indicators, strict rules and good assessment of overall market mood. This system is applicable only for intraday trading.

    ORB trading has several variations practiced by traders all over the globe. Some traders trade on a significant breakout from opening range, while others trade immediately on opening range breakout. Time window for the trades also varies from 30 minutes to 3 hours.

    Over a period of time observing and trading Indian markets, I have devised with the below system suiting our markets. Below method is both a scalping and a trending system combined into one, hence it is possible to take the advantage of quick moves and trending markets with multiple lots of trades.

    Trading Strategy

    Quite Simple and straightforward. Rules in the next section needs to be adhered to increase the success rates dramatically.
    Any stock creates a range in the first 30 minutes of trading in a day. This is calling Opening Range. The highs and lows of this timeframe is taken as support and resistance.

    1. Buy when the stock moves above the Opening Range high.
    2. Sell when the stock moves below the Opening Range low.

    PLEASE NOTE THAT THE ABOVE SYSTEM IS GENERIC, THE RULES BELOW WILL MAKE IT A SPECIFIC SYSTEM. IF YOU ARE FOLLOWING THIS SYSTEM, PLEASE FOLLOW ALL THE RULES FOR BUY / SELL STRICTLY.

    General Rules – Applicable for both Buy and Sell:

    Opening range is defined by the high and low made in the first 30 minutes.

    5 min chart with 5 EMA and 20 EMA used for making trading decisions.

    Entry should be made only on close of the 5 min candle outside the opening range.

    20 EMA is one of the key technical indicators used in this system for trend trading. Stop loss is always kept at 20 EMA for riding the profits.

    Volume confirmation – Breakout candle should show increase in volume.

    Optional confirmation- One of the two indicators - MACD or Stochastics should be favorable for the trade. (We have four indicators in Simplified Technical Analysis - Moving Averages, RSI, MACD, Stochastics. The idea here is at least two indicators should confirm the trade.).

    This is purely optional condition to enter trade.

    • Respect support and resistance levels. Do not buy just below a resistance or sell just above a support.
    • Always trade with 2 lots and book 50% as soon as you see few points profit. Second lot will be used for taking advantage of days trend.

    Rules for Buy

    • Stock should be trading above the 20 EMA line before the breakout.
    • Buy when the 5 minutes candle closes above the opening range.
    • 5 EMA line should be above the opening range at the time of breakout.

    Where to keep Stoploss

    Initial Stoploss – Low of the Opening Range.
    Trailing Stoploss - As the stock moves in your direction and you are in profits, book 50% , trail the stoploss at 20 EMA. A close of 5 min candle below 20 EMA confirms exit.

    When to book full profits

    When the 5 min candle closes below the 20 EMA in the case of longs.

    Rules for Sell

    • Stock should be trading below the 20 EMA line before the breakdown.
    • Sell when the 5 minute candle closes below the opening range.
    • 5 EMA line should be below the opening range at the time of breakout

    Where to keep Stoploss
    Initial Stoploss – High of the Opening Range.
    Trailing Stoploss - As the stock moves in your direction and you are in profits, book 50% , trail the stoploss at 20 EMA. A close of 5 min candle above 20 EMA confirms exit.

    When to book full profits

    When the 5 min candle closes above the 20 EMA.
    High Probability Trade Setups

    Below additional conditions will give high probability of success:
    • The Opening Range breakout is above previous day’s high for buy.
    • The Opening Range breakout is below previous day’s low for sell.
    • Trade is in the direction of higher time frame charts (15 min /30 min).
    • Overall Market is moving in the direction of the trade.
    • Opening range breakout happens after brief period of consolidation.

    Important Additional Points

    • If the opening range is too wide, better do not trade ORB, since the SLs will be very far in our system. You can use other trading systems in such a case.
    • Avoid Opening Range Breakout trades in case of a heavy news flow day. ( Like Inflation, Manufacturing, Policy decisions etc.). Use other trading systems once the market settles down after the news.

    Opening Range Breakout Trading Example

    [​IMG]
     
    Last edited: Sep 23, 2013
  2. augubhai

    augubhai Well-Known Member

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  3. Happy_Singh

    Happy_Singh Well-Known Member

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    the condition that says ema5 should be above/below Opening Range seems stupid to me so did not code it rest are there

    replace the buy/sell/short/cover . . . line with . . .

    Code:
    e20 = EMA(C,20);	e5 = EMA(C,5);
    Plot(e20,"E20",colorGreen); 
    Plot(e5, "e05",colorBrightGreen,styleDashed); 
    LONGFilter  = C > e20 AND e5 > e20;
    SELLFilter = C < e20;
    SHORTFilter = C < e20 AND e5 < e20;
    COVERFilter  = C > e20; 
    Buy = LONGFilter  AND (H >= ORBH) AND (BarsSinceNewDay > EntryBarStart) AND (BarsSinceNewDay <= EntryBarEnd) AND ((BarsSinceNewDay < BarsSinceLastEntrySignal) OR BothEntrySignalsNull ); 
    Sell = SELLFilter AND (L <= ORBHSL) OR (H >= ORBHTarget) OR (TimeNum() > SquareOffTime-1) AND (BarsSinceNewDay > BarsSinceLastBuySignal); 
    Short = SHORTFilter AND (L <= ORBL) AND (BarsSinceNewDay > EntryBarStart) AND (BarsSinceNewDay <= EntryBarEnd) AND ((BarsSinceNewDay < BarsSinceLastEntrySignal) OR BothEntrySignalsNull ); 
    Cover = COVERFilter AND (H >= ORBLSL) OR (L <= ORBLTarget) OR (TimeNum() > SquareOffTime-1) AND (BarsSinceNewDay > BarsSinceLastShortSignal); 
    
    just added the conditions did not check the performance . . . but serious doubts if this will improve it . . .




    :) Happy
     
    Last edited: Sep 24, 2013
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  4. Cubt

    Cubt Well-Known Member

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    Thanka much, happy. Let me test it...
     
  5. Cubt

    Cubt Well-Known Member

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    You are right, happy. It did not help, total trades were 754 and points 3100. For many dates, trade did not takes place.

    I dont understand the point here, as per Aghubai orb method, only one trade per day, if stop loss hit exit, no counter trade where there is a high we might miss a run up on the reverse trade.

    Thats why I thought we should one more filter to reverse the trade if other side of the range breaks..
     
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  6. Happy_Singh

    Happy_Singh Well-Known Member

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    Look at the scenarios many places EMA does not work for e.g. all types of failures // trend reversals

    EMA is the dogs tail, it just has to follow the price . . .

    The best ORB trade may come after an exhaustion Gaps . . . just think / visualize where will the EMAs be then . . .

    EMA is a very good tool, but we should use it only when the trend is already established . . .


    Cheers


    :) Happy
     
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  7. jamit_05

    jamit_05 Well-Known Member

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    Hi Cubt.

    Could you provide a Strike Rate and Risk Reward ratio for this method? Do you have the AFL backtest report of it?

    Tia.
     
  8. avny

    avny Well-Known Member

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    a simple and effective way to trade ORB is to treat ORB range as support and resistence ,and trade them,as you trade support and resistence,

    look for setup like ,breakout fail and break out pull back ,etc

    far more effective than fix rule base trading for ORB

    thanks
     
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  9. Cubt

    Cubt Well-Known Member

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    I have the backtest report of agubhai orb method. It was 10200 points in 6 years with 1085 trades. Will upload the excel shortly, after checking the result my interpretation is,

    Its a good system if u with stand the continues draw down. In 6 years, there were few months were total consistent loss were nearly 800 points. But after than the system generated more than 1500 points.
     
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  10. jamit_05

    jamit_05 Well-Known Member

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    Do you mean back to back continuous loss of 800 points?
     
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